Europe accepts Government has to fight to get treaty ratified

EUROPEAN DIARY:Enda Kenny says there will be no second treaty vote, but precedent suggests otherwise

THIS IS the view in Europe: the Irish would be crazy to reject the fiscal treaty. However, the Government faces an enormous challenge to ensure the pact is ratified.

As the Cabinet tries to figure out how to handle a referendum it would rather not have, observers in European circles are bracing for a tense battle.

“I can’t imagine that the Irish people will act against their own interests,” says a ranking Brussels insider who was involved in the treaty negotiation.

At one level, this individual insists the dangers presented by any rejection are such as to make a Yes vote likely. At another, acceptance is by no means inevitable. Never mind that Enda Kenny insists there will be but one vote. “They have a tradition already to vote twice,” the person says.

The implication is clear.

Although no one wants to contemplate a rerun of the Nice and Lisbon misadventures, nothing appears to be ruled out. The Taoiseach says there will be no second referendum should the evil day come. Precedent suggests otherwise.

Although Ireland’s European partners have yet to tune in fully to the debate, it is widely acknowledged that a No would weaken Dublin’s prospects of making a smooth return to markets next year.

The trap here is that such an outcome may ultimately necessitate a second bailout, and the danger magnified by the fact that aid could not be drawn from the permanent European Stability Mechanism if Ireland does not ratify the treaty.

This helps to explain the efforts made to minimise the risk of a plebiscite and the Government’s drive to keep the debate fixed on Ireland’s place in Europe. Talks on the Anglo Irish Bank promissory notes continue, but well-placed sources say a breakthrough is not imminent. This is why Joan Burton’s intervention went down badly in Cabinet circles.

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For the Government, risk is everywhere. In a note on last week’s EU summit, senior analyst Janis Emmanouilidis of the European Policy Centre think tank says the vote could easily turn into a referendum on the Government itself or the State’s overall economic situation.

“The decision to hold a referendum, which was announced in the week of the March summit, came as a surprise, as the content and wording of the treaty had been “designed’ to avoid a referendum”, says Emmanouilidis, a well-briefed observer of the EU machine.

“The Irish Government and others had been particularly eager to limit the effects of the fiscal treaty on the national sovereignty of contracting parties.”

Doom-laden headlines notwithstanding, officials in EU institutions and other member states are relatively relaxed about the vote. This has its roots in their reluctance to fret about something that has not happened, and confidence that the main casualty in a No scenario would be Ireland itself.

That, of course, is to ignore the potential for any rejection of the treaty to ripple beyond Ireland. Indeed, Emmanouilidis argues that such an event would have negative repercussions for the debt crisis overall.

“First, it would provoke speculation as to whether Ireland can remain within the euro zone, which would undermine efforts to regain confidence with respect to the ‘historical irreversibility’ of the common currency,” he writes.

“Second, an Irish No to the intergovernmental treaty would raise doubts as to whether the EU, and especially the countries of the euro zone, are able to further deepen economic, fiscal and political integration – whether national political elites are able and citizens ready to support a stronger role for ‘Brussels’ regarding national economic policies.”

Furthermore, Emmanouilidis says an Irish No might complicate ratification elsewhere. “This is not likely to prompt additional referenda, but could lead to a more intense political debate on the fiscal treaty in national parliaments or in the framework of national elections [eg in France].”

The great irony here is that Ireland’s EU-IMF rescue plan is still held to be the exemplar for the other two bailout recipients, Greece and Portugal. “The situation for the Irish programme is quite satisfactory,” the senior Brussels insider says. “If one of the three countries can go back to the markets in 2013, it will be Ireland.”

The referendum will be crucial in that context, but it will not be the only determining force. With the fate of Greece still uncertain, the situation elsewhere in the euro zone will have a bearing.

Important too will be Spain, where prime minister Mariano Rajoy has unilaterally scrapped the budget deficit target approved by his EU partners. This will be one to watch, for the treaty itself is supposed to ensure all countries stick to their fiscal targets.

The promise of good behaviour is one thing, reconciling that with realpolitik and the real economy is quite another. Whether the treaty can resolve that, the tension between the two is already in question.